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Comparing a line of credit and a
traditional second mortgage loan
If you are thinking about a home equity line of credit you also
might want to consider a more traditional second mortgage loan. This
type of loan provides you with a fixed amount of money repayable over a
fixed period. Usually the payment schedule calls for equal payments
that will pay off the entire loan within that time. You might consider
a traditional second mortgage loan instead of a home equity line if, for
example, you need a set amount for a specific purpose, such as an
addition to your home.
In deciding which type of loan best suits your needs, consider the
costs under the two alternatives. Look at the APR and other charges.
You cannot, however, simply compare the APR for a traditional mortgage
loan with the APR for a home equity line because the APRs are figured
differently.
- The APR for a traditional mortgage takes into account the
interest rate charged plus points and other finance charges.
- The APR for a home equity line is based on the periodic
interest rate alone. It does not include points or other
charges.
The above text was extracted directly from
What You Should Know About Home Equity Lines of Credit--
When Your Home Is On The Line:
As published by the Federal Reserve Board. This presentation of the information is
copyrighted ©1997 by Mortgage Market Information Services, Inc.
Pg 1 -- What is a home equity line of credit?
Pg 2 -- What should you look for when shopping for a plan?
Pg 3 -- Costs to Obtain a Home Equity Line
Pg 4 -- How will you repay your home equity plan?
Pg 5 -- Comparing a line of credit/traditional 2nd mtg.loan
Pg 6 -- Disclosures from Lenders
Pg 7 -- Glossary
Pg 8 -- Where to Go for Help
Pg 9 -- CHECKLIST
Back to Bad Credit Home
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